September 5, 2012

KOREA

Morning

Sector News & Analysis Major Indices Close Chg Chg (%) Auto (Overweight) KOSPI 1,907.13 -5.58 -0.29 August auto sales KOSPI 200 250.56 -0.67 -0.27 KOSDAQ 507.41 -5.04 -0.98

Economy & Strategy Update Turnover ('000 shares, Wbn) Fixed Income Monthly (Issue) Volume Value KOSPI 868,713 4,512 Yields should trend down despite policy actions KOSPI 200 65,977 2,794 KOSDAQ 753,649 2,949

Market Cap (Wbn) Value KOSPI 1,099,188 KOSDAQ 110,922

KOSPI Turnover (Wbn) Buy Sell Net Foreign 678 659 19 Institutional 1,063 1,096 -34 Retail 2,752 2,724 28

KOSDAQ Turnover (Wbn) Buy Sell Net Foreign 80 85 -5 Institutional 114 165 -51 Retail 2,749 2,692 57

Program Buy / Sell (Wbn) Buy Sell Net KOSPI 426 535 -109 KOSDAQ 11 12 -1

Advances & Declines Advances Declines Unchanged KOSPI 397 425 80 KOSDAQ 371 577 58

KOSPI Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Mirae 930 -67 292 Samsung Electronics 1,218,000 0 240 KODEX LEVERAGE 11,725 -70 223 LG Electronics 68,200 -1,500 156 Kia Motors 73,700 -1,900 137

KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value NEOWIZ Games 25,650 -4,100 106 AHNLAB 117,000 -7,300 100 Com2us 60,300 -5,300 77 KC FEED 6,560 270 59 Openbase 3,100 -250 56 Note: As of September 4, 2012

This document is a summary of a report prepared by Daewoo Securities Co., Ltd. („Daewoo‰) and published on our website. Please review the compliance notices contained in the original report. Information and opinions contained herein have been compiled in good faith from sources deemed to be reliable. However, the information has not been independently verified. Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy or completeness of the information and opinions contained in this document. Daewoo accepts no responsibility or liability whatsoever for any loss arising from the use of this document or its contents or otherwise arising in connection therewith. Information and opinions contained herein are subject to change without notice. This document is for informational purposes only. It is not and should not be construed as an offer or solicitation of an offer to purchase or sell any securities or other financial instruments. This document may not be reproduced, further distributed or published in whole or in part for any purpose.

Industry September 4, 2012

Overweight Auto Daewoo Securities Co., Ltd. Michael Yun August auto sales +822-768-4169 [email protected] Partial strikes hit HMC’s and Kia’s domestic outputs Young-ho Park +822-768-3033 In August, domestic new car sales at the five major Korean automakers came in at [email protected] 85,543 units, falling 29.5% MoM (down 24.9% YoY). This was mainly due to partial strikes at Hyundai Motor (HMC), Kia Motors (Kia), and GM Korea. HMCÊs domestic

sales for August came in at 35,950 units, falling 40.0% MoM and 29.9% YoY. The partial strike at HMC led to a total production loss of 65,000 units in the month, resulting in HMC reaching just 83% of its August target. KiaÊs domestic sales reached 32,078 units, dropping by 20.3% MoM (down 12.2% YoY). KiaÊs sales were also hit by the partial strikes, which led to a production loss of 37,000 units (automaker reaching just 86.4% of its August target). KiaÊs new K9 posted disappointing sales of 801 units, which we believe cannot be fully justified by production loss. Meanwhile, in August, the combined exports of the five major Korean automakers decreased by 31.7% MoM to 164,013 units. HMCÊs and KiaÊs August exports showed respective declines of 41.6% MoM and 29.2% MoM, indicating that exports were more impacted by the partial strikes.

Overseas operations maintained double-digit growth Although domestic output was weak, HMC and Kia saw their overseas production expand by 14.0% YoY and 21.5% YoY, respectively, in August. In the month, HMCÊs Chinese unit increased its production by 19.0% YoY, thanks to the commencement of operations at its third plant. Meanwhile, KiaÊs US Georgia plant increased production by 32.7% YoY, on the back of HMCÊs new Santa Fe production. HMCÊs and KiaÊs overseas operations also saw MoM increases of 13.0% and 21.0%, respectively.

Expect MoM growth to rebound in September While MoM growth figures for July and August were lackluster, we believe that the weak seasonality is over for HMC and Kia. Beginning in September, we should see production and retail sales rebound. Indeed, in the month, HMC should benefit from new car effects related to the launches of the Santa Fe in the US and the Elantra in China. Meanwhile, Kia should see a pickup in momentum from its K3 launch in September.

Daewoo Securities Co., Ltd. Yeo-sam Yoon Fixed Income Monthly (Issue) Sr. Fixed Income Strategist Yields should trend down despite policy actions +82-2-768-4124 [email protected] Weak economic outlook should limit rebound in yields

Yields are falling again after a pickup following the MPC meeting in August, which decided to leave the base rate unchanged against the streetÊs view of a cut of 0.25%.

We believe yields can still rebound as the implementation of additional monetary easing

by major central banks remains possible. But the rebound should be limited because KoreaÊs economic slowdown has become a more pressing issue than external issues.

Low-interest environment will prevail despite policy actions

While KoreaÊs gloomy economic outlook is supportive of KTBs, expectations of new easing measures are buoying equities in the US and Europe. However, over the long term, low-interest environment should prevail in the US because the global economic outlook is unlikely to improve in the near future. If KTB yields rise in relation to policy actions by major economies in September, investors may well be advised to build KTB positions.

BoK to cut the base rate in September We expect the BoK will lower the base rate to 2.75% in September. Unless the economy shows signs of recovery soon, another cut may be necessary before the end of 1H13. Yields fell sharply when the central bank cut the policy rate in July. But this time, a rate cut is unlikely to induce a sharp drop in yields because the cut is now widely anticipated, while the July cut was unexpected. Over the long term, we expect yields will be on a downward trajectory, with the 3-year KTB yield falling below 2.6% by end- 2012.

Market Data September 5, 2012

※All data as of close September 4, 2012, unless otherwise noted.

Other Major Indices Economic Indicators Close Net Chg 1D (%) YTD (%) Close 1D ago 1M ago 1Y ago MSCI Korea* 385.22 2.28 0.60 7.55 USD/KRW 1,131.80 1,134.40 1,130.40 1,063.00 KOSPI 1,907.13 -5.58 -0.29 4.42 JPY100/KRW 1,445.28 1,448.60 1,444.60 1,383.21 KOSDAQ 507.41 -5.04 -0.98 0.12 EUR/KRW 1,424.14 1,426.34 1,376.43 1,516.53 Dow Jones* 13,090.84 90.13 0.69 7.15 3Y Treasury 2.77 2.75 2.77 3.44 S&P 500* 1,406.58 7.10 0.51 10.14 3Y Corporate 3.27 3.25 3.35 4.20 NASDAQ* 3,066.96 18.25 0.60 15.79 DDR2 1Gb* 1.20 1.19 1.22 1.04 Philadelphia Semicon(Aug. 31) 396.18 5.48 1.40 7.48 NAND 16Gb* 1.76 1.76 1.87 2.83 FTSE 100* 5,758.41 46.93 0.82 1.03 Oil (Dubai)* 111.55 110.47 101.83 108.58 Nikkei 225 8,775.51 -8.38 -0.10 2.52 Gold* 1,685.30 1,685.30 1,606.00 1,874.40 Hang Seng* 19,559.21 76.64 0.39 3.61 Customer deposits (Wbn)* 18,166 18,272 17,025 19,901 Taiwan (Weighted) 7,451.35 0.82 0.01 7.18 Equity type BC (Wbn)(Aug. 31) 99,272 99,351 99,993 102,813 Note: * as of September 3, 2012 Source: KSDA, FnGuide, DRAMeXchange, MSCI

KOSPI Top 10 Foreign Net Buy / Net Sell (Wbn) KOSPI Top 10 Institutional Net Buy / Net Sell (Wbn) Net Buy Net Sell Net Buy Net Sell Samsung Electronics 16.76 LG Electronics 26.09 NCsoft 31.93 Kia Motors 55.38 Kia Motors 14.26 NCsoft 19.83 KODEX INVERSE 22.00 Hyundai Motor 39.60 POSCO 10.67 Hyundai Mobis 13.11 Cheil Industries 17.84 POSCO 28.00 HYUNDAI WIA 10.05 DSME 8.69 Samsung Heavy Ind. 12.72 KEPCO 12.73 KB Financial Group 8.62 Hyundai Heavy Industries 7.09 Samsung Engineering 12.54 LG Electronics 11.83 LG Display 8.57 Hanjin Shipping 6.21 Hyundai Heavy Industries 9.44 KB Financial Group 11.14 Hyundai Motor 6.62 Hynix 5.79 Korean Air Lines 9.34 SEMCO 10.20 S1 Corp. 6.52 SK Telecom 5.03 Hanjin Shipping 9.23 Hyundai Mobis 5.91 Samsung Electronics (P) 5.42 Hyundai Steel 4.52 KODEX LEVERAGE 9.15 Lotte Shopping 4.47 LG Chem 5.31 Doosan Infracore 4.45 GS Holdings 8.93 Able C&C 4.43 Source: KSDA, FnGuide

KOSDAQ Top 10 Foreign Net Buy / Net Sell (Wbn) KOSDAQ Top 10 Institutional Net Buy / Net Sell (Wbn) Net Buy Net Sell Net Buy Net Sell Sung Kwang Bend 1.95 CJ O Shopping 3.94 Daum Communications 3.86 Com2us 11.32 Nongwoo Bio 1.63 Interflex 2.20 Duk San Hi Metal 2.39 Wemade 6.87 ENF Technology 1.36 Celltrion 1.71 Paradise 2.11 Seoul Semiconductor 4.74 S-MAC 1.22 Medy-tox 1.38 Modetour Network 1.90 OSSTEM IMPLANT 4.24 SBS Contents Hub 1.20 Com2us 1.32 ACTOZ SOFT 1.77 Interflex 3.96 OSSTEM IMPLANT 1.06 Duk San Hi Metal 1.31 SM 1.73 CJ O Shopping 3.95 CJ FW 0.94 Seoul Semiconductor 1.25 Interpark 1.67 NEOWIZ Games 3.91 Huvitz 0.93 Danal 1.10 Taewoong 1.14 YG Entertainment 3.49 TK Corp. 0.85 Hyundai Digital Technology 0.97 INTEROJO 0.78 SEEGENE 2.34 Techno Semichem 0.79 Sung Woo HiTech 0.96 Bioland 0.76 Medy-tox 2.28 Source: KSDA, FnGuide

KOSPI Top 10 by Market Cap (Wbn) KOSDAQ Top 10 by Market Cap (Wbn) Close (W) Chg (W) Mkt Cap Close (W) Chg (W) Mkt Cap Samsung Electronics 1,218,000 0 179,411 Celltrion 29,750 100 5,195 Hyundai Motor 236,000 -5,500 51,985 Daum Communications 113,000 -1,000 1,525 POSCO 363,000 -3,000 31,649 Paradise 15,950 300 1,451 Kia Motors 73,700 -1,900 29,875 CJ O Shopping 230,000 7,900 1,427 Hyundai Mobis 304,000 -9,500 29,593 Seoul Semiconductor 20,600 -50 1,201 LG Chem 305,500 500 20,246 AHNLAB 117,000 -7,300 1,172 Samsung Life Insurance 94,700 -1,100 18,940 SM 56,200 -3,300 1,148 Hyundai Heavy Industries 236,000 2,500 17,936 GemVax 44,850 -500 1,106 Samsung Electronics (P) 736,000 11,000 16,805 CJ E&M 27,500 -200 1,043 Shinhan Financial Group 35,200 150 16,692 Interflex 69,700 -5,100 974 Source: Korea Exchange